4.1.3.6 Interrelationship Between Markets and Market Forces Flashcards
(14 cards)
Competitive Market Definition
A market operating through the interaction of supply and demand.
Complementary Products Definition
Products often bought alongside each other.
Substitute Products Definition
A competing alternative for another product.
Which type of products does Joint Demand occur with?
Complementary Products
What type of products does Composite Demand occur with?
Substitute Products, such as the demand for Chicken Meat and for Eggs
Composite Demand Effect
An increase in demand for one good or service will restrict its availability for another use, e.g. Wheat and Barley using the same plot of land.
Derived demand Definition
Demand for a product occurs as a result of demand for another good or service.
Joint Supply Definition
When the production of one product creates a by-product that can also be supplied. e.g. an increase in supply of beef will lead to an increase in supply of leather.
What do Incentive functions affect?
Supply
What do Rationing functions affect?
Demand
What do Signalling functions affect?
Supply + Demand
Incentive Function Effect
Profit incentive to encourage supply.
Rationing Function Effect
Higher prices cause some consumers to avoid purchasing the product.
Signalling Function Effect
Price signals to both producers and consumers.
